OECD growth forecast for Korea soars to 2.6% on chip exports

The Organisation for Economic Cooperation and Development (OECD) raised Korea's 2026 growth outlook from 1.7 percent to 2.6 percent, the largest upward revision among Group of 20 countries amid a continuing semiconductor export boom.

The nominal growth, which reflects both economic growth and inflation, rose 10.4 percent, according to the organization's latest Economic Outlook released on Wednesday. The previous Outlook was released in March. 

By contrast, the OECD lowered its global growth forecast to 2.8 percent from 2.9 percent over concerns of higher energy prices stemming from military conflict in the Middle East and disruptions to key trade routes, such as the Strait of Hormuz.

Exports were the main driver behind the improved outlook. The OECD expects stronger semiconductor exports to support economic growth and private investment. It also projects that consumption will recover gradually, aided by fiscal support measures such as a supplementary budget.

One of the most notable figures in the report was the OECD's projection for Korea's nominal growth rate.

"Nominal growth could approach 10 percent this year," said President Lee Jae Myung during a Cabinet meeting on May 26.

Days later, the OECD's latest forecast projects nominal growth of 10.4 percent.

The organization arrived at its latest estimate by combining its 2.6 percent real-growth forecast with a projected 7.6 percent increase in the GDP deflator, a broad measure of price changes across goods and services produced in the economy that reflects not only consumer prices but also changes in the prices of export products such as semiconductors.

A larger nominal GDP can improve fiscal indicators because government debt ratios are included in the calculation.

The OECD projected Korea's general government debt-to-GDP ratio at 48.2 percent this year and 50.2 percent next year. Those figures are 3.8 percentage points and 4.8 percentage points lower, respectively, than the OECD's projections released in December of last year.

The OECD acknowledged that government measures such as fuel price controls and fuel tax cuts could help cushion the impact of higher energy prices caused by tensions in the Middle East. However, the report recommended phasing the measures out gradually, warning that they could "increase [inflation's] persistence."

"Deficits have been mounting in the past few years, while fiscal pressures from ageing are set to intensify," said the report. "A broad political consensus for a framework aligning annual budgets with a sustainable long-term fiscal trajectory is needed."

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY NAM SOO-HYOUN [lee.jiwon10@joongang.co.kr]